Steven Hargreaves explains all about Life Insurance
What is life insurance and why do we need it?
Life assurance protects you against something that could happen. If you and I were buying a property together and we were stretching our incomes to get the biggest borrowing we could, if anything happened to me, you would probably struggle paying that mortgage.
Equally from my perspective, if anything happened to you I wouldn’t be able to afford that mortgage. So life assurance would pay an amount of money in the event of death or, in some cases, terminal illness.
It’s not just about the mortgage. I’ve just actually done a policy this morning for a young couple that have bought their first house and they’ve got a young child. The life assurance would pay out in the event of either one of them dying – but they’ve still got to think about little Alfie, who’s only a couple of months old.
So if, for argument’s sake, the dad died, mum could pay the mortgage off – but there’s no income coming in to pay bills and things. So we’ve arranged a family policy for them. It would pay out a monthly sum in the event of either one of them dying, for a certain period of time – in this case, 18 years.
So life insurance comes in a few different guises and we would arrange it around a client’s circumstances – whether they’ve got a mortgage or a young family, for example.
Is life insurance worth getting? Is it for everyone?
I’m an advocate for it because I’ve seen first hand what happens with clients that haven’t taken it. A life event – a death or a critical illness – takes place and they’ve struggled and had to sell their properties or move back in with their parents.
Life cover probably isn’t for everybody, but at the same time there is a need for it for an awful lot of people. A lot of banks and building societies don’t actually arrange life assurance for clients. You tend to find that it’s bought, not sold. People buy it but they often don’t take as much cover as perhaps they should.
How do I know if I’m eligible for life insurance?
It tends to be based on health. You wouldn’t know for certain if you’re eligible without going through an application. It can be affected by whether you’re a smoker or a non-smoker and what your pastimes are.
I’ve just done a policy for someone who races motorbikes – in that particular case they would insure him, but because there’s a greater risk it’s slightly more expensive. When I arrange a quotation for a client I always assume that there are no issues. There are no pre-existing health or medical conditions, they don’t have any dangerous pastimes or jobs that could affect the insurance.
Once we apply, we work out whether these pre-existing issues do exist. I did a roofer’s mortgage last week and he works at a height of over forty feet on a regular basis. Life insurance companies will cover him, but again the policy will be a little bit more expensive.
That’s where a broker comes in – we’re whole-of-market, so we can look at any company from A to Z to work out who will and who won’t take you on.
How much life insurance do I need and how long should I get it for?
We design life insurance around a client’s circumstances. If you and I were to take a £250,000 mortgage over 25 years, that’s where we would start – £250,000 worth of cover over 25 years. Then we would look at other things that we may or may not need.
There are all sorts of different life assurances to suit your circumstances and budget. With a lot of clients I show them the premium, and if it’s a bit expensive we just scale it back a little bit to fit the budget. It isn’t just a case of needing a set amount – it’s got to fit in with your budget as well.
With the young couple I helped this morning, their life assurance was for £115,000 and the cost was £9.20 a month – for the two of them. It was very cheap, which meant we could then talk about family cover.
It can be incredibly cheap, unless you’re old like me! Certainly for First Time Buyers and Second Time Buyers it isn’t always expensive to get that peace of mind.
What else should we consider with life insurance?
I would certainly speak to a professional. You can go online and get what you think is the best policy, but a broker will look at the additional benefits too. It’s not always down to premium.
If you’ve got pre-existing medical conditions, one insurance company may increase or ‘load’ the premium – whereas another one might not. We will talk to the different insurance companies, and most have medical underwriting, so we can place you with a certain insurer rather than one that may load the premium.
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